Attorneys general from 18 US states have filed a joint lawsuit against the Securities and Exchange Commission (SEC), its commissioners and Chairman Gary Gensler.
The lawsuit accuses the agency of exceeding its constitutional authority by taking aggressive regulatory actions against the crypto industry. It further seeks declaratory and interim measures to curb what they describe as “unconstitutional persecution” of the crypto sector.
According to a document shared by Fox Business journalist Eleanor Terrett Kentucky, Texas, Florida and Nebraska – along with the DeFi Education Fund – are leading the coalition.
The lawsuit alleges that state governments have effectively used their regulatory power to promote innovation and protect consumers in the crypto space. It further states that several states have created “laboratories for experimentation” by setting up frameworks to support blockchain technology, while others can learn from their regulatory efforts.
The class action lawsuit includes Tennessee, West Virginia, Iowa, Mississippi, Montana, Arkansas, Ohio, Kansas, Missouri, Indiana, Utah, Louisiana, South Carolina and Oklahoma. It is striking that all eighteen attorneys general are Republicans.
Unconstitutional action
The complaint highlights several state initiatives, such as requiring digital asset platforms to secure money transmitter licenses, implementing digital asset tax regulations, and providing procedures for managing unclaimed digital assets.
According to the lawsuit, these measures ensure a transparent regulatory environment tailored to local needs. However, it alleges that the SEC ignored these state-led efforts and instead attempted to impose a federal mandate without congressional approval.
In addition, the SEC has reportedly attempted to centralize regulatory control through a series of enforcement actions, which prosecutors say violate the constitutional separation of powers.
The lawsuit calls for judicial intervention to reassert state authority over crypto regulation and prevent further SEC encroachment.